Corporate Responsibility Report 2006

Overview

In late 2005, as part of our gas procurement strategy, we acquired the right to explore for gas and oil in two exploration blocks in Nigeria, namely blocks OPL 276 and OPL 283 respectively. We established Centrica Resources Nigeria Limited (CRNL) and began preparing for an appraisal programme to establish the volume of gas and oil reserves in the blocks. CRNL is the main operator and we are working with an infrastructure partner and two local Nigerian companies (one per block) to implement the project. In Nigeria, we currently have 16 employees based at our offices in Lagos, including four expatriates.

Block locations

OPL 276 is an onshore, marginal marine block comprising 524 square kilometres. It is located in a transition zone which consists of dry, flat land, fresh water rain forest swamps, mangrove swamps and beaches. It is located on the eastern fringe of Niger Delta at the estuary of the Calabar River. The centre of the block lies about 40 km from the Calabar Town Export Free Zone.

OPL 283 is an onshore block comprising 1,272 square kilometres situated in the north central part of the Niger Delta Basin. Administratively, the block is in Delta State and until recently was operated by Elf Petroleum Nigeria Limited. The block is located on land terrain that is essentially dry for most periods of the year with the exception of some areas which are liable to seasonal flooding during the peak of the rainy season. The block is accessible by road from Warri.

Key activities in 2006:

• Establishing an office base in Lagos;
• Recruitment of personnel;
• Establishing of policies, key management processes and procedures;
• Stakeholder engagement;
• Environmental & Social Impact scoping study and assessment.
• Seismic survey of chosen prospects

Policy and operating framework

In line with the Group’s Business Principles, CRNL introduced policies on health, safety and security, corporate responsibility, community relations and on environmental management during the year. We are working hard to ensure that these policies are fully integrated within our own operations and in our relationships with contractors and third parties.

Impact assessment

Understanding the environmental and social impact of our operations are at the forefront of our new exploration activities in Nigeria.

Environmental and social impact assessments (ESIAs) were undertaken during 2006, utilising government approved contractors, to give us baseline information. Our approach has been to encourage involvement from members of the community and regulatory bodies in our scoping workshops. In addition, representatives of the Federal Ministry of Environment have undertaken site visits to both blocks to verify our process and to take ground and water samples as part of the environmental baseline surveys.

The ESIA report for each block has been submitted to the regulator for approval. We have focused on recognising and protecting human rights and labour standards in line with our Group Policy on Human Rights. Those impacts identified will be addressed in our social and environmental management plan, which has been submitted as part of our ESIA report to the regulator for approval. We will publish our plans when we have received approval from the regulator.

Health, safety and security

The wellbeing of our employees is of paramount importance. Risks have been formally assessed and arrangements established via our management system to eliminate risk or reduce it to an acceptable level.

Emergency procedures and contingency plans have been established to deal with all credible scenarios. We work closely with our chosen outsourced contractor for the provision of security support services, to implement measures to avoid or protect our personnel. In conjunction with our security service provider, we have successfully tested our emergency response capability.

Engaging with stakeholders

We continued to engage with representatives of local communities, non-governmental organisations, companies with operations in Nigeria, and home and host governments to understand the business and social climate in Nigeria.

Our dialogue with a range of stakeholder groups has highlighted corruption as a particular issue within Nigeria. In line with our business principles and Policy on Bribery and Corruption we will not engage in bribery or any form of unethical inducement or payment.

Read our Group Policy on Bribery and Corruption PDF (74K)

To detail the scope of engagement, the CRNL management team has developed a community relations strategy and general principles for community relations. Of key importance:

• CRNL shall share the organisation’s vision, values and business principles with host communities and shall communicate company business activities with stakeholders
• CRNL shall not be involved in the determination of community leadership. CRNL shall at all times deal with only recognised and duly constituted community leadership in its community interface
• CRNL shall accord appropriate and adequate consideration to the expressed interests and concerns of the host communities, and shall ensure timely delivery on our commitments to avoid build up of legacy issues
• All discussions, meetings, agreements and commitments reached with communities must be documented and endorsed by relevant parties
• CRNL shall demonstrate fairness, transparency and integrity with all stakeholders, particularly host communities. All team members dealing with communities must be truthful and honest in their conduct.

We have placed significant emphasis our engagement with the communities that may be impacted by our activities. On block OPL 283 we have consulted with some 29 communities and on block OPL 276 we have had dialogue with around 40 communities

Typical issues identified:

• The communities request a new approach from Centrica and partners from the way they have been previously treated
• They expect to negotiate and confirm commitment through a Memorandum of Understanding
• They want employment opportunities for the youth
• Concerns for the impact of Centrica operations on farmland, cash crops and river pollution
• Issues of land ownership (individuals and communities)
• Issues of claims verification and prompt payment of any compensation.